Chevron Acquires Major Oil Sands Leases in Canada

3 March 2006

Chevron will use SAGD to produce the bitumen. Click to enlarge. (Explanation below.)

Chevron Corporation has acquired five oil sands leases in the Athabasca region of northern Alberta, spanning more than 180,000 acres and possessing an estimated 7.5 billion barrels of oil in place. The company hopes to be producing 100,000 barrels of oil a day within 10 years from the project.

Chevron already is active in the Canadian oil sands. The company is a 20% joint venture participant in the Athabasca Oil Sands Project (AOSP), which includes the Muskeg River Mine and the Scotford Upgrader. AOSP produces approximately 155,000 barrels per day.

The new leases are approximately 76 miles west of Fort Mackay in northern Alberta, and 24 miles south west of AOSP.

Chevron will use Steam Assisted Gravity Drainage (SAGD), an in-situ technology that uses steam and horizontal drilling to extract the bitumen. Shell Canada and Western Oil Sands will each have the right to elect to acquire a 20% working interest in these leases.

The SAGD process involves drilling pairs of horizontal wells in the oil sands reservoir. Steam is injected through an upper well—about 3 to 10 meters above the lower—and contacts the bitumen. The heated bitumen becomes mobile and flows with condensed water from the steam chamber to the lower well through gravity drainage. Thence it is lifted to the surface for upgrading.

Each well pair is typically 2,500 to 3,000 feet in length, and optimally produces 1,000 to 1,500 barrels per day. Well pairs are drilled parallel to one another, and spaced 300 to 650 feet apart.

The main operating cost for SAGD projects is the natural gas to fuel the steam generators. The Steam to Oil Ratio (SOR), which measures the volume of steam required to extract the bitumen, is the key measure of a thermal project’s efficiency. The lower the SOR, the better. Industry SOR rates for SAGD range from 2 to 4.

Cyclic Steam Stimulation (CSS), an older thermal processing technique that uses a single vertical steam injection that lets the steam “soak” the target zone for several weeks before recovering the liquid, is less efficient, with SORs ranging from 3.0 to 8.0.

I think this is great. It just highlights how this is no long term solution to anything. Not only does it require NG, which is only getting more expensive, but they're hoping to be producing 100Kb/d. What a joke. That's a drop in the bucket. The cost of this stuff will be high and alternatives will look that much more attractive. I wonder how much the cost of producing alternatives will have dropped in 10 years.

They probably use gas because nobody's taken the trouble to make a good bitumen burner yet. If they got a clue and burned bitumen in oxygen and steam, they'd get a nice, hot, steamy producer gas that could both liberate more bitumen and be a pretty good fuel on its own.

Nexen Inc 'NXY' already has a process in place that uses bitumen fuel to produce the necessary steam to run this process. When NG gets to expensive, Chevron will switch to this new process as well. Anyway, the green house effect is a joke! So what caused the earth to warm up the other 9,800 years from the last ICE AGE?

What will be the TOTAL cost of OIL extracted from tar sands when all elements such as: leeses, royalties, taxes, extraction and up-grading activities, NG, coal, water, + (ground, air, water and other down stream environment damage clean-up cost) are added? I doubt that Chevron, Shell, Petro-Canada and others will ever pay for all the damages they will do to the area over the next 50 years. There is a strong possibily that the billions $$ required to clean up the huge mess will come from tax payers unless a clean-up fund of $10 to $15/barrel is set up now. The present $3/barrel royalties are outrageously insufficient. Partial clean-up may cost 4 to 5 times more than that. Total clean-up will be impossible because it will spread over a very wide area.